I'm a co-founder of NorthBridge Energy Partners, LLC., a consulting firm that helps companies connect assets to power grids. I'm also a former Senior VP of Energy Technology Services for Constellation NewEnergy, Inc., and have 20+ years of experience in the energy industry. I've written for the Boston Business Journal, Mass High Tech and several other online industry publications. I have a B.A. from Williams College and a Masters from Tufts University’s Fletcher School.

Gas-to-Liquids Plants: No Longer Exclusive to Larger Players

Recently, British Airways announced an agreement to purchase $500 million of jet fuel converted from landfill gas. It signed with a consortium of companies to create a conversion facility in the UK, utilizing the Fischer Tropsch (FT) technology to convert gas to liquid fuels. The technology is not new, dating back to the 1920s and was used by Germany in World War II as well as South Africa during the apartheid era of isolation.

On a smaller scale, a number of companies are mobilizing to utilize the FT process to take advantage of more site-specific opportunities. Their goal is to create small-scale and modular GTL systems both on- and offshore to take advantage of a wide range of gas resources that are by themselves too small for larger multibillion GTL plants.

In particular, these companies plan to create GTL opportunities where gas byproduct from oil production is too far from pipelines and thus flared, and from smaller gas fields where scale has been a limiting factor. It has been estimated that less than 10% of the world’s gas fields are large enough to sustain a 10,000 barrels per day (bpd) GTL facility. But scaling production down to the 2,000 bpd range is estimated to open up 40% of the world’s gas fields to economic viability.

One of the companies most active in this area is UK-based Oxford Catalysts Group. They are the ones bringing the Fischer Tropsch technology to the British Airways deal. They are also aggressively pursuing natural gas plays. With15 years of experience and $300 million in investments by partners such as BP, Chevron, Petrobras, and – most recently – Roman Abramovich, Russian billionaire and Chelsea Football club owner, investing £5m for a 3.5% stake Oxford is pursuing a strategy to enter the market with modular plants that can convert gas in the 1,000 to 15,000 pbd range.

According to CEO Roy Lipski, these plants cost about $100,000 for every b/d capacity, so a 1,000 barrel/day unit would cost roughly$100 mn. These economics work if the delta in price between petroleum and natural gas continues. With gas at $4 per mmBtuLipski notes that you can produce a barrel of finished diesel product for $66.

Oxford’s US-based subsidiary in Columbus, Ohio – Velocys – has been established to address numerous perceived opportunities on the continent. Given the number of shale plays, the delta between natural gas and oil, and proximity to consumer markets, they may find a profitable niche in this space.

The conversion of gas to liquids is not a simple process. Oxford/Velocys markets three products in the US: the FT reactor, a steam methane reformer, and a hydrocracking process. These are protected by a total of 800+ patents. The simplified process is as follows:

Calumet would come up with the majority of project funding, with partners providing the remainder. A final decision is expected in the first half of the year. This business approach is standard for Oxford/Velocys. They provide the technology and licensing, while their suppliers source the physical plants. According to Lipski, this approach lets them “scale-up the business with limited investments…since cash requirements from our suppliers are matched with payments from our customers.”

Oxford/Velocys has also been selected by Sierra Energy (“Sierra”) for a $5 mn California Energy Commission (“CEC”) funded waste gasification demonstration plant to produce diesel fuel. It is projected to yield 25-100 barrels per day, by mid to late 2013. If successful, it is expected to serve as a template for a larger roll-out by Sierra. Biomass, waste gasification, and coal conversion projects may ultimately have commercial potential, but Lipski commented that “most of these projects will be longer term development efforts because these projects are more complex due to additional processing steps.”

Oxford is not the only player in the small GTL realm focused on flare gas and stranded fields. Perhaps the most formidable competitor is Compact GTL. This UK-based company is focused largely on addressing the problem of what to do with associated gas resulting from oil development that would otherwise be flared or reinjected. Their goal is to capture and process the gas, mixing the end product with the petroleum extracted from the same field. To date they have successfully demonstrated and operated – for nearly two years - a $45 mn GTL plant in coordination with Petrobras. Compact GTL is also doing client-funded work for a number of major oil companies in Russia and the former Soviet Union to utilize natural gas at a rate of up to 100 mcf/day.

Longer-term, as the technology matures, we can expect to see more GTL plants pop up, particularly the smaller ones costing in the hundreds of millions rather than tens of billions. Just how successful this technological approach will become remains to be seen. However, Oxford Catalysts’ Lipski estimates sufficient economic feedstock around the world to make 25 mn bpd – nearly as much fuel as Opec produces.

Lipski noted in an email exchange “Our ambition is to enable a new segment within the energy industry. We have made great progress in the past two years and we see two primary inflection points on our path. The first is securing the investment commitment for the initial GTL facilities. The second is achieving the successful start-up of a facility and having a commercial reference plant.“

Considering the opportunities to treat gas that would otherwise be flared, to unlock otherwise uneconomic shale and conventional gas fields, and increasing opportunities for biomass, waste and coal conversion, small-scale GTL may well have a significant niche to fill in our emerging energy picture.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.

Comments

I suggest in 2) above that you switch the term ‘long chain hydrocarbons’ to paraffins – as this is what these long chain hydrocarbons actually are. They are 40 to 60 carbon-length chains of wax. Think 40 to 60 methane NatGas molecules end to end – and this is wax. Such wax needs to be expensively hydrocracked into shorter chains to mimick traditional liquid fuels such as diesel, jet fuel and gasoline.

Most GTL developers stop with producing syndiesel (plus naptha and other heavier lubricant oils) simply because of the costs incurred with converting more intermediate syngas feedstock into H2 for hydrocracking the paraffins shorter — while producing equivalent volumes of CO2 greenhouse gas. This downside isn’t mentioned and GTL producers typically don’t go further with expensive hydrocracking to produce shorter-length kerosene jet fuel or even shorter gasoline molecules.

Why? Because producing these shorter-length kerosene and gasoline fuel molecules is even more expensive, the process uses up more syngas building blocks [the intermediate feedstock] and produces 2x or 3x more CO2 greenhouse gas emissions to create the shorter fuel molecules…

The synthetic diesel (and/or kerosene jet fuel and gasoline) produced via GTL catalysis is sulfur-free and is very clean burning. These synthetic oils are EXPENSIVE however and the “other” liquid products produced in this process ie: Naptha and Heavier Oils are not the prime target – yet these associate volumes necessitate further refining to become utilized.

Hitler had the cleanest combusting fuels in WW II – yet he fueled his war machine on the most expensive fuels of that time which were produced from low-grade, brown German coal which was gasified to produce the midstream syngas building blocks.

The Germans initiated both WW I and WW II simply because they did not have the crude oil available to fuel their own industrial revolution taking place. Seems like this is still a big problem for Germany and global populations – not enough crude oil and/or too expensive as well. What happened to CHOREN in Frieburg, Germany? This recent GTL firm attempted to duplicate this same Fischer-Tropsch GTL syndiesel producess – yet gasified pine chips instead of low grade coal as feedstock.

I support the ‘downsizing’ of this F-T GTL chemistry set by Oxford Catalysts and the Compact GTL folks. What this article’s author seemingly has no knowledge of is a different synthetic fuel entirely produced through much of the same GTL process excepting expensive hydrocracking. And this alternative GTL system actually consumes CO2 as process feedstocks instead of producing CO2 as global warming emissions/pollution. Same, new GTL fixed-bed catalytic process and molecular rearranging of CO & H2 syngas outputs something totally different which is water soluble, oil soluble, coal soluble and BIODEGRADABLE.

And I’m referring to a blend of C1-C10 higher mixed alcohols which becomes a neat, substitute fuel for gasoline when combusted in $35 FFV Chip-equipped autos and trucks.

Or the same new, stronger BTU, higher octane, far less expensive and far more profitable blend of heavier alcohols can seamlessly mix with seven different flavors of refined petroleum fuels, or ground coal or pet-coke waste – and convert all of these hydrocarbon fuels into premium varieties providing more torque, increased mileage and reduced emissions from cars, trucks, motorcycles, jets, helicopters, chain saws, lawn mowers, etc.

Stay tuned on this same GTL frequency, a lot more will be edging into the limelight and investors and project equity owners can expect only 1/3 of the Capex costs of those which are being quoted above and only 1/4 of the Opex costs to produce the new, biodegradable oxycarbon biofuel for the lifetime of the GTL Plant.

What Oxford and Compact are working on is a different type of traditional ‘fixed-bed reactor’ vessel which is smaller and more efficient than the traditional tubular GTL reactor vessels which have not changed much during past 95 years. I wish these two firms much success in demonstrating their hardware this next year or two.

Gary – Thanks for the insightful comments. It’s great to have an expert weigh in. If you would like to reach out to me on Linked In, and would be willing to share your insights on the alternative technology you mentioned, I would be grateful. Perhaps there’s a story for our readers.

I’ll look further at LinkedIn as a means to contact you personally. You’ve written a wonderful article about F-T GTL. There simply are developments happening in this broader arena which you and others are unaware of. And this is because it may be too early for some folks to begin making public announcements is all.

Gary, With world having very large suppies of natural gas and no way to get to market, Gas to liquids is the future of transportation fuels, Synfuels International has a process that is better than the German F.T. method. Here is their website, www.synfuels.com

Add appropriate technique to oil resources and you could develop a really important energy production, but of course with the correct and whealthiest sponsors. Adam Mayer Chief Marketing Officer Housing Qatar ww.housingqatar.com doha rent

Since volume is small, why inventor don’t eliminate the final step crack down long hydrocarbon to diesel. They can simply build a cheaper plant in different location, collect all the wax by same ship and crack on land base large refinery.

I would like to thank Forbes for carrying this story and allowing many readers to look at alternatives to what is considered common practice. I am Mayor of a small community of 3500 people called INUVIK in Northern Canada. We have been the centre of alot of past interests in the Oil and Gas fields. All of our fuels are transported from Southern Canada. Until a number of companies set up a partnership to connect one of the many gas fields in the region to our community to provide power and gas to homes and businesses. Unfortunately that well called “Ikhill” has watered out and we once again have to bring up a fuel source up from southern Canada to supply our community with Power and Heat. At this time we are trucking up over some 3000 kms (approx.) propane to create SNG Synthetic Natural Gas. While being surround by enough Natural Gas to have companies like Imperial Oil consider building a 1227 km Mackenzie Gas Pipeline to connect in Alberta. While decision makers in high places look at the right time to build we are held hostage to the Status Quo. Well I see the GTL Gas to Liquids as a game changer for regions like mine. With the resouces in our back yard why are we still looking at the same scenarios! It is time to look at developing our resources that mean a sustainable future.

Dimethyl ether (DME) is a very interesting route forward. Small-scale, clean, single product that can be blended and used at a wholesale LPG storage site (as opposed to the diesel which will need careful blending and hence added costs – noting the low density).

It seems that since this article was written a lot of GTL companies have struggled. Time for a good follow-up…..

GTL is not only a FT reactor. Velocys with their super-active catalyst and micro-channel reactor makes the GTL technology more portable. One more missed part is initial reformer, which converts natural gas into the intermediate phase – synthesis gas. Commercially available methane reformers are also catalyst based and that’s the second limitation to make small-scale GTL technology feasible. My company Applied Plasma Technologies, LLC (www.plasmacombustion.com) is working on a catalyst-free plasma assisted reformer to provide syngas with H2 to CO ratio over 1.8 – exactly what FT reactor needs. Merging our reformer and Velocys FT reactor will really revolutionize this field and allow the US to export oil. Will be happy to share more details. Best regards, Dr. Igor Matveev, president, 703-340-5545